FTC Charges Austin Board of Realtors with Illegally Restraining Competition

The Federal Trade Commission today charged the Austin Board of Realtors with violating the antitrust laws by effectively preventing consumers with real estate listing agreements for potentially lower-cost unbundled brokerage services from marketing their listings on important public Web sites. In settling the charges, ABOR is prohibited from adopting or enforcing any rule that treats one type of real estate listing agreement more advantageously than any other listing type, and from interfering with the ability of its members to enter into any kind of lawful listing agreement with home sellers.

ABOR is a 5,000-member, not-for-profit organization of competing real estate professionals that operates a Multiple Listing Service in the Austin, Texas, metropolitan area. Under ABOR’s rules, MLS information is available for public Web site searches only when a home seller enters into a traditional style of real estate broker listing agreement, typically associated with a non-discounted commission. If a home seller enters into a non-traditional form of listing agreement to buy lower-cost, unbundled brokerage services, ABOR blocks MLS information about the home from Web sites such as the National Association of Realtors’ “Realtor.com” site, the ABOR-owned “Austinhomesearch.com” site, and other public Web sites operated by ABOR member brokers.

“ABOR’s Web site rules create significant roadblocks for real estate brokers to offer consumers alternatives to full-service brokerage agreements,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “By its law enforcement action today, the Commission is not saying that one form of brokerage agreement is better than another. We are saying that the consumer should be able to decide.”

Types of Real Estate Listings: Under the traditional type of listing agreement, known as an Exclusive Right to Sell Listing, the property owner appoints a real estate broker for a set period of time as an exclusive agent to sell the property, and agrees to pay the listing broker a commission if and when the property is sold. An alternative form of listing agreement, often used by home sellers who do not wish to purchase the full range of brokerage services, is the Exclusive Agency Listing, which makes the listing broker the exclusive agent of the property owner, but gives the property owner the right to sell the property without extensive help from the listing broker. Under an Exclusive Agency Listing agreement, the listing broker often charges an up-front fee, but may receive a reduced commission, or no commission at all, if the owner sells the property without the broker’s further help.

Austin Board of Realtors: Comprised of more than 5,000 real estate professionals – and most of the residential real estate brokerage professionals in the Austin metropolitan area – ABOR operates the Austin/Central Texas Realty Information Service, the only multiple listing service available to metropolitan Austin. The Commission contends that ABOR has market power, because participation in ACTRIS is critical to the ability of brokers to provide effective residential real estate services in Austin. ACTRIS is a key means for brokers to publicize to other ACTRIS participants the residential real estate listings in central Texas, and a way to distribute information about real estate listings to real estate Web sites used by the general public.

In February 2005, ABOR adopted a rule preventing information about Exclusive Agency Listings contained in ACTRIS from being transmitted to public real estate Web sites. The Web site policy specifically allows only information concerning traditional Exclusive Right to Sell Listings to be included in the information made available to public Web sites.

The Commission’s Complaint: According to the Commission’s complaint, ABOR violated Section 5 of the FTC Act by unlawfully restraining competition among real estate brokers in central Texas. ABOR’s Web site policy, the Commission contends, is a joint action by a group of competitors to withhold listing information from publicly accessible Web sites unless competitors contract with home sellers in the way ABOR dictates. As such, it is a concerted refusal to deal except on specified terms. The FTC contends that ABOR’s conduct is a variation of a type of anticompetitive activity by operators of multiple listing services that was condemned by the agency two decades ago.

Specifically, the FTC charges that ABOR’s Web site policy has the effect of discouraging the use of Exclusive Agency Listings, which often are used to offer lower-cost, unbundled real estate brokerage services to consumers. The policy has caused some home sellers to switch away from Exclusive Agency Listings to traditional forms of listing agreements. For example, afterthe policy was implemented in 2005, the number of Exclusive Agency Listings decreased from 18 percent to 2.5 percent of the total listings on ACTRIS. This decrease has had an adverse effect on consumers, the FTC alleges, by limiting home sellers choices of brokerage services, and by denying home buyers the opportunity to use the Internet to see all of the houses listed by real estate brokers in the Austin area.

The Commission also contends that ABOR’s Web site policy does not produce competitive efficiencies to balance its anticompetitive effects. While an MLS in some circumstances might be concerned that buyers and sellers of properties under an Exclusive Agency Listing could “free ride” on the efforts that the MLS is intended to foster, this concern does not justify ABOR’s Web site policy, because the ABOR rules already include protections against such misuse.

Terms of the Consent Order: The consent order approved by the Commission is designed to remedy ABOR’s alleged anticompetitive conduct. It will ensure that ABOR does not misuse its market power, but also that the pro-competitive incentives of joint ventures, such as ABOR and ACTRIS, remain intact.

The order prohibits ABOR from adopting or enforcing any policy to deny, restrict, or interfere with the ability of its members or ACTRIS participants to enter into Exclusive Agency Listings or other lawful agreements with property sellers. ABOR is prohibited from preventing its members or ACTRIS participants from: (1) offering or accepting Exclusive Agency Listings or other lawful listing agreements; (2) cooperating with listings brokers or agents that offer or accept Exclusive Agency Listings or other lawful listing agreements; or (3) publishing Exclusive Agency Listings or other lawful listing agreements on Web sites otherwise approved to use ACTRIS information. The order also bars ABOR from denying or restricting the services of the ACTRIS to Exclusive Agency Listings or other lawful listings in any way that such services are not denied or restricted to Exclusive Right to Sell Listings; or treating Exclusive Agency Listings – or any other lawful listings – in a less advantageous manner than Exclusive Right to Sell Listings.

The order preserves ABOR’s ability to adopt or enforce any policy, rule, practice, or agreement that it can show is reasonably ancillary to the legitimate and beneficial objectives of ACTRIS. Finally, it requires ABOR to conform its rules to the provisions of the order within 30 days of it becoming final, and to notify its members and ACTRIS participants of the order via e-mail or its Web site. The order, which will expire in 10 years, applies to ABOR and the entities it owns and controls, including ACTRIS and Austinhomesearch.com.

The Commission vote to approve the consent order was 5-0. The order will be subject to public comment for 30 days, until August 11, 2006, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

The materials related to this case, as well as a wide range of other real estate competition information, can be found on the FTC’s real estate competition Web page, which debuted today.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.